The state of Michigan recently sold a parcel of land near
Ann Arbor to the Toyota Motor Corp. so that the auto giant could build a
technical and engineering center there. In terms of economics and good
government, the deal was a
travesty; Toyota paid only $9 million to acquire the property, while an
alternate bidder had offered $25 million.

But there’s a silver lining to the event: The
internationalization of commerce and industry has progressed to the point where
our state’s political leaders no longer feel compelled to make invidious
distinctions about whether the companies receiving their corporate welfare are
American or Japanese.

Twenty years ago, it would have been impossible to imagine
Michigan’s political establishment giving a Japanese automaker a $16 million
discount on state-owned property and then
voting two weeks later to accelerate the collection of property taxes from Michigan’s homeowners and businesses. In
fact, in 1984, Sen. Carl Levin won re-election by running television ads that
showed film footage of his opponent giving a speech to Japanese executives and
telling them how much he loved his Toyota. Two years before that, a
Chinese-American named Vincent Chin was killed outside a Detroit tavern
following an exchange of insults with laid-off autoworkers who thought he was
Japanese and thus "responsible" for taking their jobs.

Early in his first term, even President Reagan imposed
import quotas on Japanese automobiles. In 1984, presidential candidate Walter
Mondale endorsed "domestic content" legislation that would have set a limit on
the amount of foreign input allowed in the production of industrial goods.

In this environment of barely contained animosity, Sen.
Levin’s politically adept advertising reflected a widely shared fear about the
ascendancy of Japan and the prospect that Japanese companies would soon dominate
the American economy. Actually, it might be more accurate to say that it was not
domination by Japanese companies that was widely feared, but rather
domination by an abstract entity known as "the Japanese."

This apprehension was not limited to the manufacturing
sector. In the 1980s, when I was employed selling economic research to
institutional asset managers, it was common to hear explanations of daily
changes in interest rates that hinged on whether or not Japanese insurance
companies were buying or selling U.S. Treasury bonds on a particular day. The
rationale for this theory had a certain surface plausibility, since "the
Japanese" were reputed to be the largest identifiable holders of treasury
securities.

One proponent of this theory was a client of mine, a large
institutional bond manager who intensively tracked Japanese buying and selling,
thinking it held the key to understanding the overall direction of interest
rates. I pointed out to him that since "Protestants" held a larger share of U.S. Treasury debt than did "the Japanese," Protestants were actually more
responsible for changes in interest rates than the Japanese. Of course, this
client thought it was ridiculous to analytically describe "Protestants" as an
identifiable and meaningful segment of fixed-income investors, one whose
intrinsic and uniform nature would drive their actions in the bond market. But
he did not think it so ridiculous to impute this characterization to "the
Japanese." I spent a fair amount of time — to no effect, it turned out — trying to convince him that he would not have much success understanding interest rates by assuming that an economic commonality drove the buying and selling of an entire race or nation.

What has happened since then to change people’s views?
Aside from the well-known and commonly accepted economic gains from
international trade, we have experienced the benefits that result from the
increased cultural diversity that accompanies greater economic interdependence.
We get to know and do business with actual people and companies, and as we have
more direct interaction with them, we achieve a more textured understanding of
their culture, so that we rely less on the generalizations and stereotypes we
have learned from others. This deeper understanding is essential before foreign
companies are willing to make significant direct investments in overseas
markets, as Toyota is proposing to do in Ann Arbor.

Our ideas about the Japanese have evolved well beyond the
suspicions that were incubated by our less-integrated economic interests in the
1980s. Back when Sen. Levin was running his anti-Toyota ads, Gov. Granholm, who
was so instrumental in the Toyota land deal, was a first-year student at Harvard
Law School and had not yet moved to Michigan.

Today, the political and ethnic undercurrents related to
outsourcing are focused on India and China. As Mackinac Center adjunct scholar
Dan Griswold pointed out in a recent
Policy Brief, we would do well to remember that outsourcing is basically a
form of international trade, and that if we had closed off trade with Japan 20
years ago, we would not be nearly as well off economically as we are today. Free
trade and competition ultimately benefit everyone, which is precisely why Toyota
should be welcome to bid on state land in Ann Arbor — and why state officials
should turn it down when a better deal is available.

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Chris Bachelder is communications director at the Mackinac
Center for Public Policy, a research and educational institute headquartered in
Midland, Mich. Permission to reprint in whole or in part is hereby granted,
provided that the author and the Center are properly cited.